德银21号对中国A股的策略报告，英文30页：

Investing in A-shares has been made easier for global investors; we launch a report series to explore investment opportunities in the domestic market. In this first issue, we highlight that (small) cap and (low) P/B are two effective factors and recent developments are enhancing value discovery; we prefer quality value A-shares and present our analysis by addressing five key questions.

Q1: What’s been working well in A-shares? (page 2~6)
Looking at both style benchmark indices and our proprietary analysis of Ashare returns since 1997, we find that market cap and P/B are the two key return-contributing factors, and combining the two, the low-P/B small-caps have delivered superior excess returns in the long term. This time-tested general principle is no different from DMs, and we suggest investors pay extra attention to these two factors in constructing their A-share portfolios.

Q2: What’s special in A-shares? (page 7~12)
   Investor base: Retail investors dominate (>80%) A-share turnover, making it a momentum-following and high-velocity-trading market.
   Company insiders: Share-holding structure concentrated on insiders, such as parent groups, governments, PEs, etc.; restricted share unlocking is a key event that all public shareholders should watch out for in A-shares.
   Financial instruments: There is a big shortfall of hedging tools in A-shares, currently only a few index futures and ETFs are available for shorts, and single stock shorts are very much inactive.


Q3: What’s changing in A-shares? (page 13~20)
   The increase in IPOs gradually narrows the excessive (scarcity) premium in small-cap valuations by offering more equity supply, and the tightening regulatory scrutiny helps to contain market irregularities, normalizing Ashare small-caps’ stellar outperformance in recent years.
   The burgeoning of institutional investors has been progressing well and could further enhance value discovery, as domestic asset managers grow further amid rising household demand and global institutions participate more, in light of easier access and potential MSCI inclusion.

Q4: What are global investors buying in A-shares? (page 21~22)
Northbound (NB) holding data shows that blue-chip value A-shares attracted a significant amount of fund inflow, topped by Moutai, Yangtsze Power and Shanghai Airport. We notice that some NB holdings are either close to the regulatory limit of foreign ownership (30%) or have already accounted for a significant portion of free floats.

Q5: What are the stocks that we prefer in A-shares? (page 23~24)
We prefer quality value A-shares that 1) generate strong cash flows, 2) exhibit robust profitability and growth outlook, and 3) enjoy low gearing; and we show one large-cap screen and a small-cap one. We also highlight a list of relatively under-owned NB A-shares that were Deutsche Bank Buy-rated.